Meet the Investors of Social Networks and Social Media

Which VC invested the most frequently in Silicon Valley Social Networks? Surprise! They’re from NY! This is part of my continue industry analysis of the changing digital space (see all posts tagged VC), but probing which investors are most active –and are bellwethers for finding future growth companies.

Ever wonder who’s behind the backing of some of the fastest growing technology companies? To find out, I created tables and collected public data to list out the specific investors of each of the major social networks, and social media sites, and conducted frequency analysis of the investors to find out. This is part of my continued coverage of investors in the social business space, read the rest of my posts, analysis, and insights to this important group in our industry. One caveat, I’m not a financial analyst, I’m an industry analyst, and this data shouldn’t be considered for investment purposes.

Financial investment data of these social networking companies seems like it’s easy to get, but it’s very unstructured. The data was all over the web, it was hard to find a single repository of information, common sources were press releases, wikipedia, CrunchBase, and corporate web pages. It’s difficult to tell the specific amount each VC put into a shared investment round, even probing through the S-1 filings would not yield the specifics of each investor.

There was plenty of information about how much funding each startup received, but it wasn’t broken down by VC group. This analysis is based of the public available data on investment funding of the following consumer social networks: Facebook, Groupon, Foursquare, Gowalla, Twitter, Zynga, LivingSocial, LinkedIn, Branch, Pinterest, Digg, Reddit, Instagram, Tumblr, Yelp, WordPress (Automattic), and Snapchat. Of these players, only a few had public available data that they’ve been funded. Then, we segmented the investments by individual round, then looked for pattern analysis on which VC firm had invested the most frequently. Here’s the findings:

Variations on Investments Segments VC Strategies

Early Stage Funding Modest. Research found there were over 120 distinct investors, which includes about 50 individual investors or angels. Among them, most investment rounds in A-X had multiple investors in each round. A handful of angel and seed rounds had individual investors. Seed round amount across the 17 startups was a mere $3m, yet the sum of the angel rounds grew to $863m, a big chunk of that amount is Reid Hoffmans multi million dollar investment into Zynga, which in some categories can be considered to be as large as some C or D rounds.

Later Stage Funding Balloons. Across this category of 17 social networks, the largest rounds of funding were within C and D, each over 1 billion. A Rounds across these startups were a sum of $85m, followed by B Rounds of $620m, C Rounds of $1,2b, D Rounds $1,7b, then a tapering off as E of $452m F of $376m and G Rounds of $110m. As usual the later rounds had institutional investors, banks, and larger VC firms. The amorphous term “venture round” (a sum of $2.5b) in this space was often a late stage growth round, which, in my opinion, was used to bolster valuation before a startups material event.

NY Union Square Ventures Leads the Way, Frequency Wise. While this doesn’t account for total size of investments, we found that NY based Union Square Ventures invested in many deals, and had up to 14 investments in social networks over the past years. Like most rounds, they were involved in multi-investor deals, and frequently was involved in majority of A and B rounds. This investor, placed many investments a early A, then came back for B through C after they saw traction.

Highlight: Digital Sky Technologies
While not a frequent investor, Russian based DST (I’ve had a dinner with Yuri to hear his strategy), when they did invest, it was large sums, and large amounts, their current investments include:
Lead investor of Facebook $200,000,000
Partial investor of Groupon $950,000,000
Partial investor of Twitter Round $400,000,000
Partial Investor of Zynga $15,200,000

Concluding Remarks: At first, it’s surprising that the most frequent investor of silicon valley social networks is NY based Union Square ventures, but if you look at the pattern, they placed early bets, saw growth, then double and triple downed their investments. While frequency doesn’t account for total fund performance, it demonstrates the specific strategy some VC firms are playing. On the other hand, Russian Based DST places few bets, but when does, places them big and strong, after seeing growth. Both investment strategies are needed for emerging markets, both for initial catalyzing, then followed by acceleration, then increased in valuation. These patterns help to define the market maturity of a space, and you should use them to identify maturity stages in the markets in which you’re acting.